Reference no: EM132838470

Questions -

Q1. Miller Hardware paid an annual dividend of $1.10 per share recently. Today, the company announced that future dividends will be increasing by 3.5 percent annually. If you require a 12 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

Q2. The common stock of Textile Inc. pays a quarterly dividend of $0.40 a share. The company has promised to maintain a constant dividend even though economic times are tough. How much are you willing to pay for one share of this stock if you want to earn a 10 percent annual return?

Q3. Iron Manufacturers made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $2.10 a share. Secondly, all dividends after that will increase by 2.5 percent annually. What is the maximum amount you should pay to purchase a share of this stock today if you require a 10 percent rate of return?

Q4. Islander Corporation's common stock will pay a dividend of $3.50 one year from now. You plan to buy the stock now and sell at the end of one year for $70. At what price must you buy in order to receive your required return of 18%?

Q5. XYZ common stock recently paid annual dividend in the amount of $1.75 per share. The analysts estimate of the firm's growth forecast over the next 5 years is 15%. You expect the firm to slow down in the long run and estimate the long-term growth rate after 5 years to be 8%. If the required rate of return on the stock is 10%, what is your estimate of the stock price?

Q6. You observe a stock price of $18.75. You expect a dividend growth rate of 5%, and the most recent dividend was $1.50. What is the required return?